ne of my goals before 2020 was to have visited/stayed at least one night in all 50 states in the U.S. I accomplished this goal in October of 2016 when my wife Anne and I flew to Boston and drove to Camden, Maine. Yep you got it, Maine was my 50th state. We made Camden our base and drove all over the state, all the way up to Bar Harbour and to Acadia National Park.
“So, you may ask what does that have to do with vacation homes. Well as someone who owns two vacation homes in different parts of the country I can tell you they are a tremendous blessing, lots of fun, and still come with the challenges of primary “Home Ownership”.
“Many of our clients who are avid and experienced travelers have asked me over the years how I went about acquiring two vacation homes. The answer is fairly simple; saving, budgeting, being comfortable with renting the home as needed or as the market demands and buying a home that I could afford no matter what the circumstances were. That may seem like a common sense answer, but that has always been my strategy and it has always worked.
“But let’s take a slightly “deeper dive” and look at what you should consider that most advisors don’t know because they personally have not purchased or own a vacation, let alone two!
“The cost of owning a vacation home is wide-ranging because of factors that include the market, income, interest rates, down payment and the ability to qualify for an additional mortgage. Unless you have won a significant “Lottery”, paying for a vacation home in cash is a “fool’s game” no matter what realtors or financial advisors try to tell you.
“So here is my simple 3-Factor outline to use when determining whether to buy or rent a vacation home anywhere in the country.
Factor 1 – The ability to travel to the home with the frequency that you want. If you can only go 1 hour or 1 day once or twice a year then it’s probably not an economical purchase.
Factor 2 – Renting your home is always something to consider, but if you don’t want strangers sleeping in your bed, don’t even consider it. Also, you should have a third-party person or company handle the work of renting your home soup to nuts. This creates separation from the “dirty work”. Trust me, I have done it with both of my vacation homes.
Factor 3 – If you own, how much will it actually cost to enjoy your home compared to renting a home in a city, resort or vacation area you want to visit?
“Here’s the hypothetical math:
$350,000 Home Purchase Price (2Bed, 2 Bath, 1500 Square Foot)
$87,500 Down Payment @25% x $262,500 – Mortgage @ 30 years
$984.75 – Monthly mortgage payment
Insurance - $150, Taxes - $200, Utilities and misc. -$200
Total Monthly Cost - $1,534.75
“Wow!!! Can you afford that under any circumstance? If not, there is another way to travel around the country, if not around the world, and keep your hard-earned money more liquid.With the down payment of owning a $350,000 vacation home you could take a phenomenal trip each year for the next 20 years.
“Here’s the hypothetical math:
$4,250 (20 x $4,250 = $85,000)
and another smaller trip each year the next 20 years,
$3,000 ($1,534.75 x 2 mortgage payments)
and still keep a significant amount of money liquid for other investments and long-term savings. I hope this insight sheds light on other options for traveling to places you want to see. It’s very possible to have liquidity now, save a tremendous amount of wealth for your future, and travel even more as you get older. The decision is yours. Travel well my friends!”
For more information on these ideas and other wealth-building tips contact Richard Chew at [email protected], 312-952-8040/Cell * 312-243-3907/Office
Website: www.1stcig.com. 1st Capital Insurance & Retirement Group
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Richard Chew